European Commission Knocks Germany's Tax Reform

by Ulrika Lomas, Tax-News.com, Brussels

12 September 2001

A study conducted by the European Commission on Germany's recent tax reforms has concluded that they will fail in their aim to curb significantly the country's unemployment rate. Presently there are around 4.7 million people unemployed, and the figure is on the increase with no signs of slowing down.

The full findings of the report will be presented next week by European Commissioner for social-policy matters, Anna Diamantoploulou. According to the report taxes and social contributions must be cut further in order to encourage more from lower-income groups into employment.

German Chancellor Gerhard Schröder last year introduced a tax-cutting package which lowered corporate tax burdens and cleared the way for easier merger and acquisition activity. But during the past year, international financial institutions and German business leaders have been becoming increasingly dissatisfied with the Chancellor, particularly in his efforts to modernize the welfare-state economy.

Schröder has repeatedly rejected calls from business and the opposition to speed up the implementation of the 60 billion mark (US$26 billion) tax cuts. Despite the fact that many are blaming him the state of Germany's sputtering economy, Mr Schröder has stood firm, declaring that he was unable to take economic projections seriously when they are revised every two weeks. 'We will continue with what I have called the policy of the steady hand,' he has affirmed.

Recommended